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2003 Economic Summit Outlook: Economy At The CrossRoads Whats Next

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We want to know if boarding airplanes makes us targets. ... US Weekly Initial Jobless Claims - 4 week MA. P. B. C. T. 13. Core Inflation rate up just 1.5 ... – PowerPoint PPT presentation

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Title: 2003 Economic Summit Outlook: Economy At The CrossRoads Whats Next


1
2003 Economic Summit Outlook Economy At The
Cross-RoadsWhats Next?
  • May 30, 2003
  • Foxwoods Resort Casino
  • Todd P. Martin
  • First VP chief economist
  • Peoples Bank
  • 203.338.4826 Todd.Martin_at_peoples.com

2
Whats Next?
  • "The things we don't know. That's what's got
    Americans on edge. We are a nation that likes to
    know. We want to know if we're going to war. We
    want to know whom we can trust. We want to know
    if our jobs are secure.
  • We want to know if the stock market is a better
    deal than the racetrack. We want to know if our
    next medical bill will set us back a year's
    wages. We want to know if boarding airplanes
    makes us targets. And following the Columbia
    tragedy, we want to know if our technologies can
    live up to the faith we put in them.
  • The short answer to all these things We don't
    know."
  • USA Today, 2/04/03

3
Wall of Worry
  • Jobs
  • War
  • Code Orange - Terrorism
  • SARS Mad Cow
  • Deflation
  • Weak Dollar
  • Corporate Malfeasance
  • Weak Global Growth
  • North Korea - Iran
  • Widening Federal State Budget Deficits
  • Widening Trade Deficit
  • Weak Capital Spending
  • High Debt Levels
  • Wake of Stock Bubble - Negative Wealth Effect
  • Excess Capacity

4
Reasons To Be Encouraged
  • 40-Year low Interest Rates
  • Federal Tax Cuts
  • Strong Productivity
  • Weaker Dollar
  • Saddam Gone - War Went Well
  • Falling Oil Prices
  • Housing Booming
  • Confidence Rebounds
  • Stocks Up From Lows
  • Improving Corporate Profits
  • 94 Employed - Real Income Growth Positive
  • Economy Has Been Remarkably Resilient

5
US Economic Outlook
  • Economic Growth will remains sub-par for the
    first half of 2003 due to high level of
    uncertainty
  • The Fed will err on the side of accommodative
    monetary policy
  • Risk assessment Risk of deflation greater than
    inflation
  • Watching Post-War data closely - will not tighten
    until unemployment rate falls decisively.
  • The Consumer has kept expansion alive with record
    mortgage refinance and zero auto loans.
    Longer-term, corporate profits, capital
    investment, and job growth needs to improve to
    sustain recovery.
  • Risks to the downside, but combination of
    stimulative fiscal monetary policy, strong
    productivity, low inflation, weaker dollar, and
    improving corporate profits should set the stage
    for better growth in the second half of 2003.

6
The economy looks better than it feels.

Source Conference Board, Peoples Bank
7
But feels worse than it looks
monthly change (thousands) SA
Source Conference Board, BLS, Peoples Bank
8
Productivity is soaring

Source Conference Board, Peoples Bank
9
Interest Rates are at 40-50 year lows
10 Year Treasury Note Yield vs. Targeted Fed
Funds Rate
Source Conference Board, Bloomberg, Peoples Bank
10
Mortgage refi helps fuel consumer spending
Source MBA, Peoples Bank
11
ISM index shows sharp drop in manufacturing
Institute of Supply Management Survey (formally
NAPM)
Source Conference Board, ISM, Peoples Bank
12
Jobless Claims trend higher again
US Weekly Initial Jobless Claims - 4 week MA
Source Bloomberg, BLS, Peoples Bank
13
Core Inflation rate up just 1.5
CPI CPI less food energy - YOY change
Source Conference Board, Bloomberg, Peoples Bank
14
CT Economic Outlook
  • Peoples Bank Business Barometer shows
    Connecticut Economy has stalled-out
  • Downturn was not a repeat of early 1990s due to
    more diversified employment mix (defense a
    stabilizing factor) - balanced real estate
    markets - banks have adequate capital credit
    available.
  • Job losses continue, unemployment rates by LMAs
    have more than doubled since mid-2000, but the
    Stamford, Danbury New London LMAs still have
    relatively tight job markets.
  • CT vulnerable to national (and global) economy,
    falling stocks, rising oil prices, and
    deteriorating state fiscal condition.

15
People's Bank Business Barometer stalls
Source Peoples Bank, Centerprise Advisors
16
The CT economy is bouncing along the bottom
Current downturn milder than early 1990s recession
Source Peoples Bank, Centerprise Advisors
17
CT unemployment rate still lower than US rate
of labor force (SA)
Source CT Labor Department
18
CT unemployment claims still too high, but lower
than early 1990s peak
Source CT Labor Department
19
Unemployment rates have more than doubled
CT Unemployment Rates by Labor Market Area
(NSA)
Source CT Labor Dept.
20
CT employment growth under-performs US
Better performance than early 90s recession, but
starting to slip again
Source BLS, CT Labor Department
21
CT Job losses across the board YOY
Change in CT Non-Farm Employment Mar. 2003 vs.
Mar. 2002 ( Not SA)
Source CT Labor Department
22
Fewer job gains than losses in CT YOY
Change in CT Non-Farm Employment Mar. 2003 vs.
Mar. 2002 ( Not SA)
Source CT Labor Department
23
Housing permits off to a weaker start this year
Change in CT New Housing Permits Authorized YTD
Jan. - Mar. 2003 vs. 2002 by LMA
Weaker activity due to weather, lack of land,
more stringent zoning
Source CT DECD
24
CT Home Price growth starting to moderate
Conventional Mortgage Home Price index - annual
growth rates
Source FHLMC, Peoples Bank
25
Housing is not overbuild like the mid-1980s
Total housing permits authorized in CT in units
2002-2005 is forecast
SourceCT DECD, New England Economic Project
26
Auto registrations down just 0.6 YTD in 2003
Connecticut New Auto Registrations Processed YTD
- (Jan. - Mar.)
Source CT Labor Department
27
Tax revenues up 3.1 over last year
Year-to-Date change in CT Tax Revenues ( FY
02-03 vs. FY 01-02 July - Mar.)
Up 221 million
Source State of CT Dept. of Revenue Services
28
Fall in income taxes offset by increases in other
taxes
Year-to-Date change in CT Tax Revenues ( FY 02-03
vs. FY 01-02 July - Mar.)
Millions
Source State of CT Dept. of Revenue Services
29
Summary
  • Growth will remain sub-par through first half
    2003 - Iraq overshadowed economic data through
    mid-April
  • Fed may err on the side of lower rates by the
    June FOMC meeting but short-term rates should
    begin to rise by mid-2004
  • Connecticut economic growth has stalled -
    meaningful job growth not likely until at least
    2004 - Higher Taxes will hamper recovery
  • Watch Jobless Claims - employment - purchasing
    managers index - oil prices - home prices -
    consumer confidence - chain store sales -
    geopolitical uncertainties

30
For more information...
Please visit our web site at www.peoples.com for
Economic Analysis click on Investments and
other bank products services
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